Latika Bourke, Megan Levy

A shocking image believed to show a Sydney boy holding a decapitated head in Syria showed the ''barbaric'' nature of the terrorist organisation the Islamic State of Syria and the Levant, Prime Minister Tony Abbott has said.

The image posted on Twitter shows a young boy, believed to be the son of Sydney jihadist Khaled Sharrouf, holding up the head of a slain Syrian soldier.

The image was taken in the northern Syrian city of Raqqa and was posted last week on the Twitter account of Sharrouf, Australia's most wanted terrorist who fled to Syria last year and is now an ISIL fighter.

Mr Abbott said on Monday that Australia would "gladly join the humanitarian airlift" in supplying aid to ten of thousands of Yazidi people and Christians trapped by the "terrorist army" in Iraq.

A boy believed to be Australian Khaled Sharrouf's son holds the decapitated head of a soldier. Photo: From Khaled Sharrouf's Twitter account

''I would be careful about using that shocking, evil image for purposes it shouldn't be used for,'' he told reporters in Melbourne.

The photo shows a boy, wearing a cap, checked pants and a blue shirt, struggling with both arms to hold up the head of the slain soldier.

The caption reads: "That's my boy!"

It is one of a several photos posted by Sharrouf, who security agencies believe travelled to Syria with his family.

Another photo shows Sharrouf also holding the decapitated head, while in another photograph, Sharrouf is dressed in camouflage fatigues and posing with his three young sons who are holding guns.

Defence Minister David Johnston said on Monday the photographs underlined why the government was moving to introduce tougher counter-terrorism laws.

"I'm obviously revolted by that and it underscores the importance of the counter-terrorism laws we are seeking to enact," Senator Johnston told ABC Radio.

But he stressed the bulk of Muslims were peaceful people.

Meanwhile, Australia’s support for Iraq’s fight against the terrorist ISIL group could extend beyond humanitarian support to military action, Senator Johnston said.

When directly asked if Australia's involvement could involve military action alongside any potential US move, Senator Johnston left open the possibility.

''This ISIL, Islamic State terrorist organisation is to be extremely feared and taken with great seriousness. We've seen atrocities; we've seen all manner of things – who knows what the future holds with these people. And accordingly, we are ready to assist in any way we can should we be asked to assist by the Americans and the Iraqi Government.

''Now the fact is this could turn very nasty in a very short space of time and I think anything is to be expected and I don't believe that right-minded countries can just sit back and watch atrocities unfold on the nightly television without taking some action,'' he told ABC Radio.

Labor says it supports Australia’s humanitarian effort in Iraq, but has not been consulted on any need to commit troops.

''The government has not spoken to Labor about that at all,'' Mr Shorten said.

''But when it comes to humanitarian relief, Labor is signed up for that.''

Sharrouf, a convicted terrorist, is wanted by Australian Federal Police over crimes in Syria and Iraq, which include the shooting execution of a captured Iraqi official in the desert outside the Iraqi city of Mosul.

The 31-year-old previously was sentenced to five years and three months in prison in Australia for his role in the 2005 Pendennis plot. He pleaded guilty to possessing items, six clocks and 140 batteries, connected with the preparation of a terrorist act.

Late last year, Sharrouf left for the Middle East on his brother's passport.

He recently sent an extraordinary manifesto to Fairfax Media, threatening a terrorist attack on Australian soil and revealing he had been ''on the path they hate'' since he was 19.

He also criticised the government's hypocrisy in allowing Jews to fight for the Israeli Defence Force while banning Muslims from fighting in the Syrian or Iraqi conflicts.

"They fight us and harm us we will retaliate we will dedicate our lives to your unrest," he wrote. "We r not mad men or dysfunctional as they portray us to be [sic]. By Allah, we are the sane. Anyone who sees what is happening to the muslims [sic] around the world . . . and sits back and does nothing, he is insane."

He demanded the release of 12 Muslim prisoners and claimed he played the Australian Security Intelligence Organisation and police for fools while he was under surveillance.

Terrorism experts and authorities have cast serious doubt on the seriousness of Mr Sharrouf's threats but say he has a tight social media network of followers who may be swayed by his extremist rhetoric.

After serving a four-year sentence for his role in the Pendennis terrorism plot, Mr Sharrouf became a debt collector and claims he fooled authorities into believing he was not a jihadi. A court found he was diagnosed with depression in 1999 and schizophrenia in 2002, a fact he disputes.

"Let them know that I played the government there like ignorant children i was never mentally ill not then nor now [sic]," he wrote. "I seen them following me and I was working for Allah right underneath there noses [sic]."